Consuming to reach and to use will not be used enough

This preview shows page 34 - 36 out of 51 pages.

consuming to reach and to use will not be used enough to justify corporate expenditures to build and maintain them. [ CITATION Mic13 \l 17417 ] CHAPTER 9 1. Why do firms enter the global market?
market may enable the firm to increase its output and slide more rapidly on the learning curve. Increased production for the international market can also help reduce the cost of production for domestic sales. [ CITATION Mic13 \l 17417 ] On the other hand, in reaction to competitive pressures, a firm may fear losing domestic market share to competing firms or losing foreign markets permanently to new competitors. Overproduction is a major reactive motivation. Historically, during downturns in the domestic business cycle, markets abroad provided an ideal outlet for high inventories. Such market expansion often does not represent commitment by management but rather a temporary safety valve activity. Instead of developing an international marketing perspective by adjusting the marketing mix to needs abroad, firms stimulate export sales with short-term price cuts. Second, stable or declining domestic sales, whether measured in sales volume or market share, also stimulate firms to expand internationally. Products marketed by the firm domestically may be in the declining stage of the product life cycle; thus, the firm may opt to prolong the life of the product by expanding the market. Third, excess capacity can be a powerful motivation. If equipment is not fully utilized, international expansion can help achieve broader distribution of fixed costs. Alternatively, if all fixed costs are assigned to domestic production, the firm can

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture